Employment and Indemnity clause

Employment and Indemnity clause. This can sometimes be called merely the “Employment clause” especially if it is found in a charterparty in which the charterer is not obliged to indemnify the shipowner against all consequences or liabilities from following the charterer’s orders as regarding the employment of the ship: “To indemnify” means to reimburse a person for his loss or to place him in the same financial position after a. loss in which he was before the loss.

In the old (1946) New York Produce Exchange form (NYPE) of time charterparty the clause was of this type, giving very little protection to the owner.

In the ASBATIME (1981) time charterparty, which is derived from the old NYPE, the clause contains the indemnity provisions. These may be found in “rider clauses” added to the old NYPE, if this is used and also as a standard, printed clause in a standard form charterparty such as BALTIME.

In the HYPE charterparty it is stated in cl. 8:

“. . . The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to load, stow and trim the cargo at their expense under the supervision of the Captain, who is to sign Bills of Lading for cargo as presented, in conformity with Mate’s or Tally Clerk’s receipts.”

In the ASBATIME charterparty the above clause is extended to reflect common practice where the master delegates his signing powers to the charterers or their agents and also to introduce fairness by way of an express provision for indemnity. It continues in cl. 8:

“However, at Charterer’s option the Charterers or their agents may sign bills of lading on behalf of the Captain always in conformity with mate’s or tally clerk’s receipts. All bills of lading shall be without prejudice to this Charter and the Charterers shall indemnify the Owners against all consequences or liabilities which may arise from any inconsistency between this Charter and any bills of lading or waybills signed by the Charterers or by their agents or by the Captain at their request.”

Without this express indemnity, shipowners have to rely on indemnity implied by judges or arbitrators, should there be a dispute because the master complied with the charterer’s orders and directions or because of irregularities with the bills of lading issued under the time charter. This principle of “implied indemnity” was established in an old-English case (Dugdale v. Lovering, 1875) where the judge said: “. . . when an act has been done (by a master) under the express directions of (the Charterer) . . . it such an act is not apparently illegal in itself, but is clone honestly and bona fide in compliance with (the charterer’s) directions he shall be bound to indemnify (the shipowner) against the consequences …” (words in brackets added.)

The express indemnity can also be found in BALTIME, cl. 9, which states:

“.. . The Master to be under the orders of the Charterers as regards employment, agency or other arrangements. The Charterers to indemnify the Owners against all consequences or liabilities arising from the Master, Officers or Agents signing Bills of Lading or other documents . . .”

The word “employment” means employment of the ship, not that of the people on board the ship. It also does not include control by the time Charterer of the ship’s navigation or management. Such complete control would be in the hands of a demise Charterer. Indeed, cl. 26 of NYPE (and most of cl. 25 of the NYPE derived ASBATIME) states that:

“Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers. The Owners to remain responsible for the navigation of the vessel, insurance, crew, and all other matters, same as when trading for their own account.”


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